<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Piedmont Natural Gas Company, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
PIEDMONT NATURAL GAS
COMPANY, INC.
1915 REXFORD ROAD/POST OFFICE BOX 33068
CHARLOTTE, NORTH CAROLINA 28233
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
AND
PROXY STATEMENT
ANNUAL MEETING
FEBRUARY 26, 1999
<PAGE> 3
PIEDMONT NATURAL GAS COMPANY, INC.
1915 REXFORD ROAD
POST OFFICE BOX 33068
CHARLOTTE, NORTH CAROLINA 28233
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
FEBRUARY 26, 1999
The Annual Meeting of Shareholders of Piedmont Natural Gas Company, Inc.
(the "Company"), will be held at the Executive Offices of the Company, 1915
Rexford Road, Charlotte, North Carolina, on February 26, 1999, at 9:30 a.m.,
E.S.T., for the following purposes:
1. To elect four Directors, each to serve for a term of three years
(Proposal A);
2. To ratify the selection by the Board of Directors of the firm of
Deloitte & Touche LLP as independent auditors of the Company for the
current fiscal year (Proposal B); and
3. To transact such other business as may properly come before the
Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on January 14, 1999,
as the record date for the determination of shareholders entitled to notice of
and to vote at the Meeting. Accordingly, only holders of Common Stock of record
on such date will be entitled to vote at the Meeting.
By order of the Board of Directors,
Martin C. Ruegsegger
Vice President, Corporate Counsel and
Secretary
January 27, 1999
THE FORM OF PROXY IS ENCLOSED TO ENABLE YOU TO VOTE YOUR SHARES AT THE MEETING.
YOU ARE URGED, REGARDLESS OF THE NUMBER OF SHARES YOU HOLD, TO COMPLETE, SIGN,
DATE AND RETURN THE PROXY PROMPTLY. A RETURN ENVELOPE, WHICH REQUIRES NO POSTAGE
IF MAILED IN THE UNITED STATES, IS ENCLOSED FOR YOUR CONVENIENCE.
<PAGE> 4
PIEDMONT NATURAL GAS COMPANY, INC.
1915 REXFORD ROAD
POST OFFICE BOX 33068
CHARLOTTE, NORTH CAROLINA 28233
PROXY STATEMENT
The following information is furnished in connection with the Annual
Meeting of Shareholders (the "Meeting") of Piedmont Natural Gas Company, Inc.
(the "Company"), to be held at the Company's executive offices in Charlotte,
North Carolina, on February 26, 1999, and was first mailed to shareholders on or
about January 27, 1999. The notice is set forth on the front page of this Proxy
Statement. The Company's principal executive offices are located at 1915 Rexford
Road, Charlotte, North Carolina 28211, and its telephone number is 704-364-3120.
The proxy accompanying this Proxy Statement is solicited by the Board of
Directors of the Company. The cost of soliciting proxies will be borne by the
Company. In addition to solicitation by mail, proxies may be solicited by
Directors, officers and employees of the Company, personally or by telephone or
facsimile, none of whom will be separately compensated for such activities. The
Company has retained W.F. Doring & Co. to assist in the solicitation of proxies
in the same manner for an estimated fee of $4,000, plus reimbursement of
out-of-pocket expenses. Arrangements may also be made with brokerage houses and
other custodians, nominees and fiduciaries who are record holders of shares of
Common Stock for the forwarding of proxy materials to the beneficial owners of
such shares, and the Company will reimburse them for their expenses.
The Company had issued and outstanding on January 14, 1999, 30,820,728
shares of Common Stock, which shares constitute the only class of stock which is
entitled to notice of and to vote at the Meeting. Only holders of Common Stock
of record at the close of business on January 14, 1999, will be entitled to
notice of and to vote at the Meeting, one vote for each share of stock.
The holders of a majority of the outstanding shares of Common Stock present
in person or represented by proxy at the Meeting will constitute a quorum. Since
many shareholders cannot attend the Meeting, it is necessary that a large number
be represented by proxy. The Board has accordingly designated proxyholders to
represent those shareholders who cannot be present in person and who desire to
be so represented.
The presence of a shareholder at the Meeting will not automatically revoke
such shareholder's proxy. However, shareholders who sign proxies have the right
to revoke them at any time before they are voted by filing with the Vice
President, Corporate Counsel and Secretary of the Company an instrument revoking
the proxy or a duly executed proxy bearing a later date or by attending the
Meeting and voting in person.
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth each person or entity known by management to
own of record or beneficially more than 5% of the outstanding Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND
NAME AND ADDRESS OF NATURE OF PERCENT OF
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
-------------- ------------------- -------------------- ----------
<S> <C> <C> <C>
Common Stock................... Cincinnati Financial Corporation 1,888,600 (1) 6.1%
P. O. Box 145496
Cincinnati, Ohio 45250-2632
</TABLE>
- ---------------
(1) Information is based on a Schedule 13G filed by Cincinnati Financial
Corporation with the Securities and Exchange Commission on February 11,
1998. The Schedule 13G reports that Cincinnati Financial Corporation
exercises sole voting and sole dispositive power over the shares, that the
shares are held in custody by The Fifth Third Bank, and that the Schedule
13G was filed by Cincinnati Financial Corporation for itself and its
subsidiary, Cincinnati Insurance Company.
PURPOSES OF THE MEETING
At the Meeting, the shareholders will consider and vote upon the following
matters:
1. The election of four Directors, each of whom would serve for a term
of three years or until their successors are duly elected and qualified
(Proposal A);
2. The ratification of the action of the Board in selecting Deloitte &
Touche LLP as independent auditors of the Company for the current fiscal
year (Proposal B); and
3. Such other business as may properly come before the Meeting or any
adjournment(s) thereof.
The enclosed form of proxy provides a means for any shareholder to direct
the proxyholders to vote for all nominees for election to the Board or to
withhold authority to vote for any one or more or all of the nominees. A
shareholder may also vote for or against or may abstain from voting on Proposal
B. If the enclosed proxy is properly marked, signed, dated and returned, and not
revoked, it will be voted in accordance with the instructions thereon. If no
instructions are given, the proxy will be voted for the nominees named herein
for election to the Board and for the ratification of the selection by the Board
of independent auditors for the current fiscal year. Should other matters
properly come before the Meeting, the proxyholders will vote the proxies thereon
in accordance with their best judgment.
Abstentions and broker non-votes will be counted for purposes of
determining whether a quorum is present at the Meeting. With respect to election
of Directors and ratification of auditors, abstentions and broker non-votes will
not affect the election results, so long as a quorum is present.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT EACH SHAREHOLDER VOTE
FOR EACH PROPOSAL.
2
<PAGE> 6
PROPOSAL A
ELECTION OF DIRECTORS
The By-Laws of the Company provide that the Board of Directors shall
consist of such number of directors as shall be fixed from time to time by
resolution of the Board, but shall not be less than nine. The Articles of
Incorporation divide the Board into three classes, designated Class I, Class II
and Class III, with one class standing for election each year for a three-year
term. The Articles provide that each class shall consist as nearly as possible
of one-third of the total number of directors constituting the entire Board.
Muriel W. Helms, Ned R. McWherter, Donald S. Russell, Jr., and John E.
Simkins, Jr., whose terms expire at the Meeting, are standing for reelection for
three-year terms. All these nominees have been previously elected by the
shareholders. In the absence of instructions to the contrary, it is intended
that the shares covered by the accompanying proxy will be voted for the election
of these persons as directors in Class I to serve three-year terms expiring in
2002. The election of directors requires a plurality of the votes cast at the
Meeting. If all nominees are elected, the Board will consist of eleven members.
The Board does not know of any nominee or nominees who will be unable or
unwilling to serve, but if any of them should be unable to serve, the proxies
will be voted under discretionary authority for a substitute or substitutes
designated by the Board, unless appropriate action has been taken to provide for
a lesser number of directors.
The following sets forth certain information concerning each person
nominated for election as a director and each person whose term of office as a
director will continue after the Meeting:
<TABLE>
<CAPTION>
DIRECTOR OF THE BUSINESS EXPERIENCE DURING PAST
NAME COMPANY SINCE FIVE YEARS AND OTHER INFORMATION
---- --------------- --------------------------------
<S> <C> <C>
NOMINEES FOR ELECTION AS DIRECTORS FOR TERMS EXPIRING IN 2002:
Muriel W. Helms...................... 1993 Age 57. Partner, Greater Carolinas Real Estate
Services, Inc., Charlotte, North Carolina. From
1990 to 1997, President of the Charlotte Area of
Prudential Carolinas Realty (real estate).
Ned R. McWherter..................... 1995 Age 68. Former Governor of the State of
Tennessee, Dresden, Tennessee. Mr. McWherter is
also a director of Coca-Cola Bottling Co.
Consolidated, Phoenix Healthcare Corporation,
and SunTrust Bank.
Donald S. Russell, Jr................ 1966 Age 60. Attorney at Law, Columbia, South
Carolina. Mr. Russell is also a director of
Jefferson-Pilot Corporation.
John E. Simkins, Jr.................. 1966 Age 60. Since October 1998, Assistant to the
Director, Information Technology and
Communications Division, Maryland Department of
Public Safety and Correctional Services,
Cockeysville, Maryland. From March 1996 through
April 1997, Mr. Simkins was Deputy State
Director, Maryland Small Business Development
Center Network. From 1993 until his retirement
in 1995, he was Program Planning Manager,
Airborne Surveillance Division, Westinghouse
Electric Corporation (electronics products and
services).
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
DIRECTOR OF THE BUSINESS EXPERIENCE DURING PAST
NAME COMPANY SINCE FIVE YEARS AND OTHER INFORMATION
---- --------------- --------------------------------
<S> <C> <C>
DIRECTORS CONTINUING IN OFFICE UNTIL 2000:
C.M. Butler III...................... 1991 Age 55. Attorney and consultant in financial and
regulatory affairs, Houston, Texas. Mr. Butler
is also a director of OEC Compression
Corporation.
Sam J. DiGiovanni.................... 1988 Age 70. Former Partner in Arthur Andersen & Co.
(certified public accountants), Chicago,
Illinois.
John W. Harris....................... 1997 Age 51. President of The Harris Group
(commercial real estate and investment
management), Charlotte, North Carolina. Mr.
Harris is also a director of US Airways and
Virginia Power Company.
John F. McNair III................... 1984 Age 71. Retired President and Chief Executive
Officer of Wachovia Bank of North Carolina,
N.A., and Wachovia Corporation of North
Carolina, Winston-Salem, North Carolina. Mr.
McNair is also Chairman of the Research Triangle
Foundation.
DIRECTORS CONTINUING IN OFFICE UNTIL 2001:
Jerry W. Amos........................ 1978 Age 60. Partner in the law firm of Amos,
Jeffries & Robinson, L.L.P., Greensboro, North
Carolina, and General Counsel to the Company.
Prior to October 1994, Mr. Amos was a partner in
the law firm of Brooks, Pierce, McLendon,
Humphrey & Leonard, L.L.P.
John H. Maxheim...................... 1979 Age 64. Chairman of the Board, President and
Chief Executive Officer of the Company,
Charlotte, North Carolina. Mr. Maxheim is also a
director of the Southern Region Board of
Wachovia Bank of North Carolina, N.A., and Conso
Products Company.
Walter S. Montgomery, Jr............. 1973 Age 69. President and Treasurer and Chief
Executive Officer of Spartan Mills (textile
manufacturer), Spartanburg, South Carolina. Mr.
Montgomery is also a director of M.S. Bailey &
Son, Allendale Insurance Company (Advisory
Board), Spartan Mills and Montgomery Industries.
</TABLE>
4
<PAGE> 8
INFORMATION REGARDING THE BOARD OF DIRECTORS
ATTENDANCE AT BOARD AND COMMITTEE MEETINGS
During the fiscal year ended October 31, 1998, the Board held four
meetings. All Directors, except Messrs. Butler and Montgomery, attended 75% or
more of the aggregate meetings of the Board and committees of the Board on which
they served.
COMMITTEES OF THE BOARD
The Board has several standing committees, including an Audit Committee, a
Compensation Committee and a Nominating Committee.
The members of the Audit Committee are Sam J. DiGiovanni (Chairman), C.M.
Butler III, Ned R. McWherter and John E. Simkins, Jr. The Committee met twice
during the fiscal year. The Audit Committee recommends to the Board the
engagement of the independent auditors, reviews the arrangements for and scope
of the audit, reviews internal auditing procedures and the adequacy of internal
controls, and reviews the reports submitted by the independent auditors.
The members of the Compensation Committee are John F. McNair III
(Chairman), Sam J. DiGiovanni, John W. Harris and Walter S. Montgomery, Jr. John
H. Maxheim is an ex officio member. The Committee met three times during the
fiscal year. The Compensation Committee oversees compensation policies and
programs, including administration of the Executive Long-Term Incentive Plan. It
also recommends to the Board the salaries and other compensation of elected
officers and Directors and reviews executive development and management
succession plans.
The members of the Nominating Committee are Jerry W. Amos (Chairman), John
H. Maxheim, John W. Harris, John F. McNair III and Donald S. Russell, Jr. The
Committee met once during the fiscal year. The Nominating Committee recommends
to the Board nominees to fill vacancies on the Board as they occur and
recommends candidates for election as directors at annual meetings of
shareholders. The Committee will consider nominees recommended by shareholders
upon submission in writing to the Vice President, Corporate Counsel and
Secretary of the Company of the names of such nominees, together with their
qualifications for service and evidence of their willingness to serve. Such
nominations to the Board must be made at least sixty days prior to the
shareholders' meeting at which the election of directors will take place.
DIRECTORS' COMPENSATION
Directors who are not employees of the Company or its affiliated companies
are paid an annual retainer for Board service of $20,000, an attendance fee of
$750 for each Board meeting attended and an attendance fee of $500 for each
committee meeting attended, in addition to reimbursement for expenses incurred
in attending such meetings. If a Director elects to invest any of his or her
director fees in the Dividend Reinvestment and Stock Purchase Plan (the "DRIP"),
the Company will match 25% of such fees for investment in the DRIP. Directors
who are employees receive no additional compensation for their services as
Directors.
A non-employee Director who shall have served more than ten continuous
years on the Board is entitled to receive on retirement from the Board at any
age, an annual retirement benefit equal to the annual retainer fee in effect at
the time of his or her retirement, which retirement benefit will continue for
life. Should a non-employee Director die before ten years have elapsed from the
retirement date of that Director from the Board,
5
<PAGE> 9
a retirement benefit shall be paid to the Director's designated beneficiary(s)
in an amount equal to the annual retainer fee in effect at the time of the
Director's retirement for the remaining portion of the ten-year period following
the retirement date of that Director from the Board. Should a non-employee
Director die while serving on the Board, the Director's previously designated
beneficiary(s) shall be paid ten times the annual retainer fee that is in effect
at the date of such Director's death.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Amos, Jeffries & Robinson, L.L.P., a limited liability partnership,
received $429,545 for legal services performed for the Company during the 1998
fiscal year. This law firm is expected to continue to perform such services
during the current fiscal year. Jerry W. Amos, a Director and General Counsel to
the Company, is a partner in this law firm.
Transactions involving this law firm and the Company were made in the
ordinary course of business and, in the opinion of management, were on
substantially the same terms to the Company as those prevailing at the time from
unrelated parties for comparable transactions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF
THE NOMINEES AS DIRECTORS FOR THE TERMS STATED.
PROPOSAL B
SELECTION OF INDEPENDENT AUDITORS
The Board of Directors, upon recommendation of the Audit Committee, has
selected Deloitte & Touche LLP, independent auditors, to serve as the
independent auditors of the Company for the fiscal year ending October 31, 1999.
Deloitte & Touche LLP has acted as the independent auditors of the Company since
1951. Although not required to submit this selection to the shareholders for
ratification, the Directors believe it is desirable that an expression of
shareholder opinion be solicited.
Representatives of Deloitte & Touche LLP are expected to be present at the
Meeting. They will have an opportunity to make a statement if they desire to do
so and are expected to be available to respond to appropriate questions.
If a majority of the shares of Common Stock represented at the Meeting is
voted against ratification of the selection of Deloitte & Touche LLP, the
selection of independent auditors will be reconsidered by the Board.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE RATIFICATION
OF THE SELECTION OF DELOITTE & TOUCHE LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
6
<PAGE> 10
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the number of shares of Common Stock
beneficially owned, as of December 1, 1998, by each Director and nominee, each
executive officer named in the Summary Compensation Table and all Directors and
executive officers as a group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF
NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP(1) CLASS(2)
------------------------ -------------------------- ----------
<S> <C> <C>
DIRECTORS
Jerry W. Amos....................................... 62,713(3)(4) --
C. M. Butler III.................................... 1,500 --
Sam J. DiGiovanni................................... 7,525(3)(5) --
John W. Harris...................................... 1,000 --
Muriel W. Helms..................................... 2,181(3)(6) --
John H. Maxheim..................................... 147,765(3)(7) --
John F. McNair III.................................. 8,168(3) --
Ned R. McWherter.................................... 5,000 --
Walter S. Montgomery, Jr............................ 54,832(3)(8) --
Donald S. Russell, Jr............................... 70,624 --
John E. Simkins, Jr................................. 2,709 --
EXECUTIVE OFFICERS
David J. Dzuricky................................... 3,512 --
Ray B. Killough..................................... 28,895(3)(7) --
Ware F. Schiefer.................................... 32,174(7)(9) --
Thomas E. Skains.................................... 3,729(3) --
All Directors and Executive Officers as a Group (32
persons).......................................... 535,080(3)(7) --
</TABLE>
- ---------------
(1) Unless otherwise indicated, each person listed has sole voting and
investment power.
(2) No person listed in the table beneficially owned more than 1% of the
outstanding Common Stock as of December 1, 1998. The number of shares
beneficially owned by all Directors and executive officers as a group
represents less than 2% of the outstanding Common Stock.
(3) The number of shares shown includes those credited to participants' accounts
under the DRIP.
(4) Includes 2,500 shares held by Mr. Amos' spouse and 88 shares held by his
grandson, a minor, of which Mr. Amos is custodian.
(5) Includes 3,960 shares held by Mr. DiGiovanni's spouse.
(6) Includes 93 shares held in trust of which Ms. Helms is trustee and 423
shares held by Ms. Helms' spouse.
(7) The number of shares shown includes those credited to participants' accounts
under the Employee Stock Ownership Plan.
(8) Includes 1,544 shares held in trust of which Mr. Montgomery is a co-trustee,
87 shares held in trust for the benefit of Mr. Montgomery, and 51,222 shares
of which Mr. Montgomery shares voting power as a personal representative of
the estate of Walter S. Montgomery, Sr.
(9) Includes 864 shares held by Mr. Schiefer in joint tenancy with his spouse.
7
<PAGE> 11
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following Summary Compensation Table sets forth a summary of the
compensation paid to the Company's Chief Executive Officer and to the four other
most highly compensated executive officers in the three fiscal years ended
October 31, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION PAYOUTS
-------------------------- ------------
OTHER ANNUAL LTIP ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY COMPENSATION(1) PAYOUTS COMPENSATION(2)
- --------------------------- ---- -------- --------------- ------- ---------------
<S> <C> <C> <C> <C> <C>
John H. Maxheim..................... 1998 $472,115 $ 99,200 $486,420 $139,389
Chairman of the Board, President 1997 447,115 111,669 436,224 132,446
and Chief Executive Officer 1996 423,846 126,392 400,802 123,427
Ware F. Schiefer.................... 1998 237,308 38,236 169,899 52,560
Executive Vice President 1997 223,308 42,381 147,477 44,969
1996 208,154 47,128 135,509 50,987
Ray B. Killough..................... 1998 202,308 29,107 109,526 15,369
Senior Vice President--Operations 1997 192,308 31,518 91,334 14,808
1996 182,308 34,195 83,916 14,441
Thomas E. Skains.................... 1998 202,115 28,092 111,385 10,937
Senior Vice President--Gas 1997 187,500 30,632 -- 11,499
Supply and Services 1996 174,692 242,251 -- 19,004
David J. Dzuricky................... 1998 194,692 25,595 94,649 21,258
Senior Vice President--Finance 1997 182,115 27,652 -- 20,164
1996 167,115 256,580 -- 21,469
</TABLE>
- ---------------
(1) These amounts for 1998 consist of payments of dividend equivalents on units
awarded, but not yet distributed, under the Executive Long-Term Incentive
Plan.
(2) These amounts for 1998 consist of the following:
<TABLE>
<CAPTION>
Maxheim Schiefer Killough Skains Dzuricky
-------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Insurance premiums plus assumed
income tax liabilities under
the Supplemental Executive
Benefit Plan (SEBP)............ $77,489 $31,960 $10,369 $ 5,937 $16,484
Salary continuation accruals
under the SEBP................. 56,900 15,600 -- -- --
Company contributions to the
Salary Investment Plan......... 5,000 5,000 5,000 5,000 4,774
</TABLE>
EMPLOYMENT CONTRACTS AND TERMINATION, SEVERANCE AND CHANGE-OF-CONTROL
ARRANGEMENTS
On February 26, 1993, Mr. Maxheim entered into a four-year employment
agreement with the Company, effective December 1, 1992 (the "Commencement
Date"), at an initial base salary of $385,000 per year. On each anniversary of
the Commencement Date, the then remaining term is automatically extended for an
additional year, unless the Company or Mr. Maxheim gives notice of termination
of such renewal 90 days
8
<PAGE> 12
prior to such anniversary date; provided, however, that the term of the
agreement shall not extend beyond Mr. Maxheim's 65th birthday. Mr. Maxheim's
base salary agreement is subject to review and increase annually by the Board.
The agreement contains a covenant not to compete with the Company or its
subsidiaries for the term of the agreement and for two years after termination
of the agreement, except in the case of termination without "cause," as defined
therein, by the Company.
Mr. Maxheim's employment agreement shall be terminated by his death or
total permanent disability and may be terminated for cause by the Company or
upon 60 days' notice by Mr. Maxheim. Mr. Maxheim's compensation would continue
to be paid through the end of the month in which his death occurred, through the
effective date of his voluntary termination of employment (except in connection
with a "Change in Control"), and for 90 days following the date of a
determination of total permanent disability. If terminated for cause, Mr.
Maxheim would be entitled to no payments of compensation after the date of
termination.
In the event Mr. Maxheim's employment is terminated by the Company without
cause, the nature of his duties is diminished after a Change in Control of the
Company, or he voluntarily terminates his employment upon certain changes in his
rights or duties after a Change in Control whether or not approved by the Board,
he will be entitled to receive his annual base salary (which base salary
automatically shall be increased 10% per year in the event of a Change in
Control) and all amounts which he may be or may become entitled to receive under
any bonus or incentive plan for the remainder of the term of the agreement. He
also will continue to be eligible to participate in other benefit plans of the
Company for the remainder of the term of the agreement. Upon such a Change in
Control that has not been approved by the requisite vote of the Board, the then
remaining term of the agreement is automatically extended for a four-year
period. In the event Mr. Maxheim is terminated by the Company without cause
within 12 months after a Change in Control, he is entitled to receive in a lump
sum all base salary (including automatic increases resulting from the Change in
Control), incentive compensation and bonuses payable to him over the remaining
term of the agreement. Under the agreement, should any dispute arise between Mr.
Maxheim and the Company regarding the terms of the agreement, whether in formal
legal proceedings or otherwise, the Company must reimburse him for all his costs
and expenses should he prevail in such dispute.
On May 31, 1996, Ware F. Schiefer, David J. Dzuricky, Ray B. Killough and
Thomas E. Skains, senior executive officers of the Company, entered into
employment agreements (the "Agreements") with the Company. The Board had
previously determined that the continued retention of the services of these
officers on a long-term basis was in the best interest of the Company in that it
promoted the stability of senior management, it enabled the Company to retain
the services of a well-qualified officer with extensive contacts in the natural
gas industry, and it secured the continued services of the officer
notwithstanding any change in control of the Company.
The term of employment under the Agreement for Mr. Schiefer is for a
two-year period commencing on June 1, 1996, and the term of employment under
each Agreement for Messrs. Dzuricky, Killough and Skains is for a one-year
period commencing June 1, 1996. All such Agreements shall automatically be
extended to a full one-year period, in the case of Mr. Schiefer, a two-year
period, on each successive day during the term of each Agreement. If written
notice from the Company or the officer is delivered to the other party advising
the other party that the Agreement is not to be further extended, then the
Agreement is terminated on the first anniversary of the date of notice or, in
the case of Mr. Schiefer, on the second anniversary of the date of notice. No
extension shall allow the Agreements to extend beyond the date on which the
officer reaches 65 years of age.
9
<PAGE> 13
Each officer's base salary may be increased from time to time by the Board
as reflected by the duties required of the officer. Each Agreement contains a
covenant not to compete with the Company or its subsidiaries for the term of the
Agreement without prior written consent of the Company.
Each Agreement shall be terminated upon the death or total permanent
disability of the officer. Compensation would continue to be paid through the
end of the month in which the officer died, through the effective date of the
officer's voluntary termination of employment (except in connection with a
"Change in Control"), and for 90 days following. If terminated for cause, the
officer would not be entitled to receive compensation or other benefits (other
than vested benefits) after the date of termination. In the event of involuntary
termination of the officer's employment with, or at any time following, any
Change of Control, or in the event of voluntary termination by the officer in
connection with, or within 12 months after (in the case of Mr. Schiefer, 24
months after) any Change in Control, the officer shall be paid the following
amount for a period of 12 months (in the case of Mr. Schiefer, 24 months) from
the effective date of termination or until such time as the officer reaches 65
years of age, whichever is less: (a) base salary plus (b) all amounts to which
the officer may be or may become entitled to receive under any incentive or
bonus plan, plus (c) participation in all welfare benefit plans, practices,
policies and programs at least as favorable as the most favorable of such plans,
practices, policies and programs in effect at any time during the 90-day period
preceding the officer's termination and with the costs of such benefits paid in
the same manner as prior to termination. Finally, should any dispute arise
between the officer and the Company regarding the terms of the Agreement,
whether in formal legal proceedings or otherwise, the Company must reimburse the
officer for all the officer's costs and expenses should the officer prevail in
such dispute.
RETIREMENT PLAN
The Company maintains a defined benefit plan (the "Retirement Plan") which
covers all full-time employees upon attainment of age 21 and completion of one
year of service, or attainment of age 30. The full cost of the Retirement Plan
is paid by the Company. Benefits under the Retirement Plan become fully vested
prior to normal retirement age upon the completion of five years of service, and
are determined by a step-rate formula which utilizes the participant's covered
compensation, final average earnings and credited years of service.
In the event of retirement at or after age 65, the average Retirement Plan
participant with maximum credited service of 35 years is, in general, entitled
to an annual pension for life in an amount which, when added to primary Social
Security benefits, will equal approximately 75% of the participant's average
annual compensation during the five consecutive years of the last ten years
prior to retirement during which the participant received his or her highest
compensation. Benefits are also provided under the Retirement Plan in the event
of early retirement at or after age 55 with ten years of credited service and in
the event of retirement for disability.
The persons named in the Summary Compensation Table above are participants
in the Retirement Plan which provides for fixed benefits computed on an
actuarial basis for all covered employees. The amount of the contribution,
payment or accrual by the Company with respect to a specified person under the
Retirement Plan cannot readily be separately or individually calculated. The
Company was not permitted by law to make a deductible contribution to the
Retirement Plan during the 1998 plan year, as it was actuarily determined that
the Retirement Plan met the definition of "fully funded" under Section 214(c)(6)
of the Tax Code.
Based upon current remuneration of the individuals named in the Summary
Compensation Table and their expected credited years of service at normal
retirement age (65), the estimated annual retirement
10
<PAGE> 14
benefits payable upon retirement to each of the named individuals and their
credited years of service as of October 31, 1998, are as follows: Mr. Maxheim,
$103,965, 20 years; Mr. Schiefer, $87,752, 33 years; Mr. Killough, $81,465, 25
years; Mr. Skains, $74,811, three years; and Mr. Dzuricky, $72,135, three years.
The amounts shown in the following table are those payable in the event of
retirement at age 65 on December 31, 1998. The table illustrates the estimated
normal annual retirement benefits payable under the Retirement Plan for the
specified remuneration and years of service classifications. The amounts shown
do not reflect reductions which would result from joint and survivor elections.
<TABLE>
<CAPTION>
ANNUAL BENEFITS UPON RETIREMENT
WITH YEARS OF SERVICE INDICATED
-------------------------------
FINAL AVERAGE ANNUAL EARNINGS 15 25 35
- ----------------------------- ------- -------- --------
<S> <C> <C> <C>
$150,000.................................................... $52,740 $ 73,680 $ 80,400
200,000.................................................... 66,580 99,110 108,360
250,000.................................................... 75,540 117,030 128,072
300,000.................................................... 75,540 117,030 128,072
350,000.................................................... 75,540 117,030 128,072
400,000.................................................... 75,540 117,030 128,072
450,000.................................................... 75,540 117,030 128,072
</TABLE>
The Employee Retirement Income Security Act of 1974 places certain
limitations on benefits which may be paid under qualified plans. Current law
limits the amount payable in 1998 under a defined benefit plan to $130,000 and
limits compensation used in 1998 for determining benefits to $160,000 per year.
11
<PAGE> 15
COMPARISONS OF CUMULATIVE TOTAL SHAREHOLDER RETURNS
The following performance graph compares the Company's cumulative total
shareholder return from October 31, 1993, through October 31, 1998 (a five-year
period), to that of the Standard & Poor's 500 Stock Index, a broad market index
("S & P 500"), and to that of the Standard & Poor's Natural Gas Index, an index
of natural gas utility companies (the "S & P Natural Gas").
The graph assumes that the value of an investment in Common Stock and in
each index was $100 on October 31, 1993, and that all dividends were reinvested.
Stock price performances shown on the graph are not indicative of future price
performances.
COMPARISONS OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
VALUE OF $100 INVESTED AT OCTOBER 31, 1993
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) PNG S&P 500 INDUSTRY**
<S> <C> <C> <C>
1993 100 100 100
1994 83 104 95
1995 96 131 109
1996 112 163 159
1997 135 215 178
1998 174 262 204
</TABLE>
12
<PAGE> 16
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors provides overall
guidance in the development of the Company's executive compensation programs,
including its Employee Salary Administration Plan and Executive Long-Term
Incentive Plan. During 1998, the Committee was composed of four outside
directors. The Committee reviews the Performance Management Program for salaried
employees, the chief executive officer's compensation level, and other officer
compensation levels. In addition, the Committee evaluates the performance of
management and considers management succession and related matters. To assist
the Committee in its review and evaluations, independent compensation
consultants are periodically retained to confirm the competitiveness of the
Company's compensation policies and practices.
The goals of the Compensation Committee are 1) to create compensation
packages for officers and key executives which will attract and retain persons
of outstanding ability and 2) to reward those officers and key executives for
superior corporate performance as measured by the Company's financial results
and strategic achievements, and provide a greater incentive for the officers and
key managers to make material contributions to the success of the Company, its
shareholders and the service it provides to its customers.
Executive compensation at the Company for 1998 was comprised primarily of
two elements: 1) base salary and 2) long-term incentive awards. The relative
levels of base salary for the Company's officers are designed to reflect each
officer's scope of responsibility and accountability within the Company. To
determine the necessary amounts of base salary to attract and retain top quality
management, the Compensation Committee reviews comparable salary and other
compensation arrangements in effect at comparable local natural gas distribution
companies as well as a large number of industrial organizations. The
compensation policy of the Company, endorsed by the Committee, is that a
substantial portion of the annual compensation of each officer relates to and
must be contingent upon the performance of the Company, as well as the
individual contribution of each officer. A portion of an officer's compensation
therefore, is "at risk" through long-term incentive compensation. Target levels,
depending upon management responsibilities, can amount to approximately 30 to 50
percent of average annual salary compensation. Over time, the compensation
policy of the Company continues to place less emphasis on base salary and
greater emphasis on variable, performance-related long-term incentive
compensation. The goal of this policy is to further align the interests of
management with the interests of shareholders.
Regarding base salary compensation, the compensation for each of the five
highest paid officers for 1998 has been reviewed and has been found to be
reasonable in view of the Company's performance, as compared to executives in
similarly situated positions in peer group companies and the contribution of
those officers to the established performance standards.
The aforementioned compensation policy which places "at risk" certain
compensation has been implemented through adoption of an executive long-term
incentive plan. The Board of Directors and shareholders first approved such a
plan in 1986. According to the terms of that 1986 plan, no more units can now be
issued. In 1996, the Board of Directors adopted a substantially similar
executive long-term incentive plan that was approved by the shareholders in
1997. Under this new plan, as in the old plan, units (consisting of a
combination of shares of Common Stock and cash) may be awarded by the Board to
eligible participants and, depending upon the levels of financial performance
and customer satisfaction achieved by the Company during a performance period,
distribution of those awards may be made. Awards are based on achievement of
preestablished internal measures and performance standards. The new plan
requires that a minimum threshold must be achieved in order for any award to be
made.
13
<PAGE> 17
For example, in 1995 under the previous incentive plan the Board of
Directors, at the recommendation of the Compensation Committee, adopted a
five-year performance period program that is currently in effect where the
financial performance target is a 6 percent compounded, average annual increase
in net after-tax earnings. If this target is achieved, an award of the units may
be granted by the Board to eligible executives and distributed over a three-year
period. If performance exceeds targeted performance goals, then up to 120% of
the units may be awarded as determined by the Board of Directors. Under the
newly adopted executive long-term incentive plan, the Compensation Committee
plans to recommend to the Board that similar performance programs be adopted for
the "at risk" component of executive compensation.
The general executive compensation policies described above also apply to
the recommendations made by the Compensation Committee and approved by the Board
(other than Mr. Maxheim) with respect to the 1998 compensation for Mr. Maxheim
as the Company's Chairman of the Board, President and Chief Executive Officer.
The 1998 base salary for Mr. Maxheim was based principally on his rights under
his employment agreement with the Company dated February 26, 1993, as described
in the Company's proxy statement. In light of the previous decisions of the
Board of Directors, the employment agreement established Mr. Maxheim's minimum
annual base salary at $475,000 for 1998. This amount had been increased $25,000
from his base salary in 1997 in recognition of the officer's overall performance
and in recognition under his leadership which contributed to an increase in
value of the Company's common stock at an annual compound return of 13.3 percent
over the past five years. Mr. Maxheim is also eligible for awards of units under
the Executive Long-Term Incentive Plan as more fully described in the Company=s
proxy statement.
Submitted by the Compensation Committee
John F. McNair III, Chairman
Sam J. DiGiovanni
John W. Harris
Walter S. Montgomery, Jr.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Maxheim is an ex officio member of the Compensation Committee. As an ex
officio member, he participates in the discussions of the Committee but does not
vote on Committee actions. Moreover, he does not participate in and is not
present during the Committee's deliberations upon compensation matters related
to him.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Directors,
executive officers and persons who own more than 10% of the Common Stock to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission ("SEC") and the New York Stock Exchange. Directors, executive
officers and greater than 10% beneficial owners are required by SEC regulations
to furnish the Company with copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the
Company and written representations from Directors and executive officers, the
Company believes that during the 1998 fiscal year, its Directors and executive
officers complied with all applicable Section 16(a) filing requirements.
14
<PAGE> 18
PROPOSALS FOR 2000 ANNUAL MEETING OF SHAREHOLDERS
Any shareholder proposal intended to be presented at the 2000 Annual
Meeting of Shareholders must be received by the Vice President, Corporate
Counsel and Secretary at the Company's executive offices no later than September
24, 1999, in order to be considered for inclusion in the Proxy Statement for
such meeting.
OTHER BUSINESS
The Board and management do not know of any other matters to be presented
at the Meeting. If other matters do properly come before the Meeting, it is
intended that the persons named in the accompanying form of proxy will vote the
proxies in accordance with their best judgment. The form of proxy confers
discretionary authority to take action with respect to any additional matters
which may come before the Meeting.
MISCELLANEOUS
The Annual Report of the Company for the 1998 fiscal year, which includes
audited financial statements, is being mailed along with this Proxy Statement;
however, it is not intended that the Annual Report be a part of the Proxy
Statement or a solicitation of proxies.
Upon written request of a shareholder, the Company will provide, without
charge, a copy of its Annual Report on Form 10-K for the fiscal year, including
financial statements and schedules thereto, required to be filed with the SEC.
Requests should be directed to: Martin C. Ruegsegger, Vice President, Corporate
Counsel and Secretary, Piedmont Natural Gas Company, Inc., Post Office Box
33068, Charlotte, North Carolina 28233.
Shareholders are respectfully urged to complete, sign, date and return the
accompanying form of proxy in the enclosed envelope. Your prompt response will
be appreciated.
By order of the Board of Directors,
Martin C. Ruegsegger
Vice President, Corporate Counsel and
Secretary
January 27, 1999
15
<PAGE> 19
PIEDMONT NATURAL GAS COMPANY, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS ON FEBRUARY 26, 1999
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John H. Maxheim, John F. McNair III and
Walter S. Montgomery, Jr., and each of them, with full power of substitution and
power to act alone, as proxies to vote all the shares of Common Stock which the
undersigned would be entitled to vote if personally present and acting at the
Annual Meeting of Shareholders of Piedmont Natural Gas Company, Inc., to be held
February 26, 1999, and at any adjournment or adjournments thereof, as follows:
The Board of Directors recommends a vote FOR the following proposals:
A. ELECTION OF DIRECTORS
<TABLE>
<S> <C>
[ ] FOR the nominees listed below [ ] WITHHOLD AUTHORITY to vote for all
(except as indicated to the contrary below) nominees listed below
</TABLE>
Muriel W. Helms, Ned R. McWherter, Donald S. Russell, Jr., and
John E. Simkins, Jr.
(To withhold authority to vote for any individual nominee, write that nominee's
name in the space provided below.)
- --------------------------------------------------------------------------------
B. RATIFICATION OF SELECTION OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be signed on the reverse side)
(Continued from other side)
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting. This proxy when properly
executed will be voted as directed herein by the undersigned shareholder. If no
direction is made, this proxy will be voted for proposals A and B.
Dated: , 1999
------------------
------------------------------
Signature
------------------------------
Signature (if held jointly)
Please sign exactly as name
appears hereon, date and
return in the enclosed
business reply envelope. Joint
owners should each sign
personally. Corporation
proxies should be signed by an
authorized officer. Executors,
administrators, trustees,
etc., should so indicate when
signing.
